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The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production
The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overheads are currently absorbed by using a machine hour rate the total of production overheads for the period are analyzed as follows: Rs. Machine department costs (rent, business rates, depreciation, and supervision) 10,430 Setup costs 5,250 Stores receiving 3,600 Inspection / Quality control 2,100 Material handling and dispatch 4,620 You have ascertained that the 'Cost Drivers' to be used are listed below for the overhead costs shown: Costs Set up costs Stores receiving Inspection / Quality control Material handling and dispatch Cost Driver Number of production runs Requisitions raised Number of production runs Orders executed The number of requisitions raised on the store was 20 for each period product and the number of orders executed was 42, each order being for a batch of a product. You are required: a) To calculate the total costs of each product if all overhead costs are absorbed on machine hour basis. b) To calculate the total costs for each product using activity based costing. c) To calculate and list the unit product costs from your figures in (a) and (b) above to show the difference and to comment briefly on any conclusions which may be drawn and which could have profit and pricing implications.
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